www.eidebailly.com www.eidebailly.com What the GASB’s Preliminary Views May Mean to Your State Marcie Handy, CPA, Assistant State Comptroller – State of Utah Eric S. Berman, MSA, CPA, Partner – Eide Bailly LLP Give Me Leases or Give Me Fiduciary Responsibilities! Patrick Henry 1775
22
Embed
Www.eidebailly.com What the GASB’s Preliminary Views May Mean to Your State Marcie Handy, CPA, Assistant State Comptroller – State of Utah Eric S. Berman,
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
www.eidebail ly.comwww.eidebail ly.com
What the GASB’s Preliminary Views May Mean to Your State
Marcie Handy, CPA, Assistant State Comptroller – State of Utah
Eric S. Berman, MSA, CPA, Partner – Eide Bailly LLP
Give Me Leases or Give Me Fiduciary Responsibilities!
Payments, $27.7M Expenditures• Use Excel Spreadsheet to Maintain/Track Each Lease
www.eidebail ly.comwww.eidebail ly.com 99
Leases
State of Utah – Field Test • Field Test - Issues
• Time Consuming – Have to Reexamine Each Lease
• Renewal, Termination Clauses• Non-lease or Multiple Lease components• Subleases• Measure Underlying Asset at Historical Cost• Determine Current Lease Liability• Recalculate the Net Present Value
• Determined Will Take 1 Hour Per Lease, so….
www.eidebail ly.comwww.eidebail ly.com 1010
Leases
State of Utah – Field Test • We Ignored Lease Payments < $100K
• Eliminated the Evaluation of 90 Leases• $3.1M or 2% of $157M in Future Minimum Lease
Payments
• We Grouped Leases by Dollars• Leases Between $100K - $200K Evaluated as a
Group and Applied Patterns• Most Leases have a term of 5 years or less
• Going Forward Will Evaluate All New Leases
www.eidebail ly.comwww.eidebail ly.com 1111
Fiduciary Responsibilities—Where The Board Has Been
• Fiduciary definition• A government is a fiduciary and has a fiduciary
responsibility when it controls assets• From a pass-through grant for which the government does not have
administrative or direct financial involvement• In accordance with a trust agreement or equivalent arrangement in
which the government itself is not a beneficiary• For the benefit of individuals that are not required to be part of the
citizenry, as a condition of being a beneficiary, or organizations or other governments that are not part of the financial reporting entity.
• Custodial funds—A new fund type that includes any fiduciary arrangement that is not governed by a formal trust agreement or equivalent arrangement
• Fiduciary activities continue to be reported as basic financial statements
www.eidebail ly.comwww.eidebail ly.com 1212
When Does a Government Control Assets – putting it all together
• Government Might Have Control IF• It is directly holding the assets, regardless of its
responsibility for administering the exchange of those assets
• It is directly responsible for administering the exchange of assets, regardless of the legal structures that might separate the government and the entity that is holding the assets
• It has assigned its responsibility for administering the exchange of assets (for example, to an asset manager) but maintains the ability to reassign that responsibility, regardless of the legal structures that might separate the government and the entity that is holding the assets.
www.eidebail ly.comwww.eidebail ly.com 1313
When Does a Government Control Assets – putting it all together
• Government Might NOT Have Control IF• It is acting as a trustee for assets and has no
responsibility for administering the exchange of assets even though it may have the ability to establish parameters (for example, providing a selection of investment options) for those that have the responsibility
• It is neither directly holding nor acting as a trustee for assets and has no responsibility for administering the exchange of assets even though it may have the ability to establish parameters for those that have the responsibility
• It is not directly holding assets and has no responsibility for administering the exchange of assets.
www.eidebail ly.comwww.eidebail ly.com 1414
In other words…
www.eidebail ly.comwww.eidebail ly.com 1515
So What are the Board’s Views?
• Fiduciary funds would continue to be reported in the basic financial statements• No change in full accrual• Classification within fiduciary funds based on
the presence or absence of a trust agreement or equivalent
• No change in investment trust / private purpose trusts with trust agreements or equivalent if
• Trust assets are dedicated to providing benefits to recipients in accordance with the benefit terms
• Trust assets are legally protected from the creditors of the government that is acting as the trustee
www.eidebail ly.comwww.eidebail ly.com 1616
But There’s Something New…
• Custodial Funds• Would report fiduciary activities for which
there is no trust agreement or equivalent arrangement. Including:
• Certain funds previously classified as agency funds• The portion of certain funds previously classified as
pension (and other employee benefit) trust funds that is held for the benefit of employees of another government, but for which there is no trust agreement or equivalent arrangement• Could include things like rate stabilization reserves for future
pension contributions held at employers• Certain funds previously classified as investment trust
funds or private-purpose trust funds, but for which there is no trust agreement or equivalent arrangement.
www.eidebail ly.comwww.eidebail ly.com 1717
Other Aspects of the PV
• Reporting of fiduciary funds would continue• Additions disaggregated by source • Net investment income• Deductions disaggregated by type• Administrative costs (if applicable)
• Fiduciary component unit reporting• Inconsistent at best, especially with IRC 457, 403(b) and
401 plans• Proposal is to present combined fiduciary component units
of fiduciary component units• Example - Combine plans before presentation in a general
government’s pension trust funds
• Business-type activities with fiduciary activities would now present fiduciary funds
• Examples – Hospitals, Higher Education
www.eidebail ly.comwww.eidebail ly.com 1818
State of Utah – Field Test
• State Has Approximately 400 Funds• Evaluated 24 Private Purpose Trust Funds• Evaluated 69 Agency Funds• Evaluated 2 Investment Trust and OPEB Funds• Did Not Evaluate Pension Trust funds• Results
• No Change to Investment Trust Funds or OPEB Trust Funds
• Reclassified 7 Funds PPT, 5 to Custodial, 2 to Governmental
• 5 PPT Are Custodial = No Trust Agreement/Equivalent Arrangement
• 2 PPT Are Governmental = Assets Are Not Fiduciary
www.eidebail ly.comwww.eidebail ly.com 1919
State of Utah – Field Test
• Field Test - Issues• Trust Agreement or Equivalent Arrangement
Where Trust Assets:• Are dedicated to providing benefits to recipients• Are legally protected from the creditors of the
government
• No Examples of Equivalent Arrangement• Implied/inferred from previous actions?• Statute?• Court cases?
www.eidebail ly.comwww.eidebail ly.com 2020
State of Utah – Field Test
• Field Test - Issues• Recognition of a Liability in Fiduciary Funds
• “Present obligations to sacrifice resources that the government has little or no discretion to avoid”
• When an event has occurred that compels the government to disburse the fiduciary resources.
• When no further action or condition is required by beneficiary
• Need Further Clarification – When to Recognize a Liability
• Utah has a PPT that has an annual actuary valuation• Liability is recorded based on results of the actuary